Smarta opened its paper this morning to discover the surprising news that airline Virgin Atlantic has marked its 25th anniversary by almost doubling its annual profit.
That's great news for Richard Branson, not so great news for rival airline British Airways, which reported on Friday that it had made a pre-tax loss of more than £400m, with no sign of recovery in sight.
Willie Walsh, BA’s chief executive, told The Guardian last week he doesn’t think the economic environment will improve. “We don’t see any signs of recovery, nothing,” he sighed.
What have Virgin done that BA haven’t? They both charge similar fares and fly to different destinations – how can the two outcomes have been so different?
“We’re just managing the business to make sure we remain strong and hang on to our cash,” said the company’s chief executive Steve Ridgeway with a cool shrug – which may just hit the nail on the head.
It could be something to do with Virgin’s policy of hedging against oil prices, which hit $147 last year. BA cited high fuel prices as one of the biggest causes of its losses last year, so it could be that – or could it be that BA has just branched out too much?
BA has seen a catalogue of problems in the last few months, beginning with Terminal Five and going downhill from there, with 2,500 redundancies announced last August and a new issue over its proposal to, in the words of Richard Branson, ‘effectively merge’ with American Airlines.
“It doesn’t make sense to encourage even less competition by allowing dominant carriers to increase their stranglehold,” Branson said of the merger yesterday – but he might not have too much to worry about. If Walsh doesn’t play his cards right, BA might not be around for much longer.